Why Blockchain is the simple answer to Global Poverty
There is a lot of hype surrounding Blockchain, also known as distributed ledger technology (DLT). Unless you have been sleeping under a rock for the past 5 years you should have heard about the cryptocurrency impact on financial institutions. The banks have had to wake up and get with the program and action is being taken less they get left behind!
According to the World Economic Forum:
DLT is a digital system for recording assets in which the transactions and their details are recorded in multiple places at the same time. Unlike traditional databases, distributed ledgers have no central data store or administrative functionality.
Over $1.4 billion has been invested in DLT between 2013-2016;
>90 central banks engaged in DLT discussions worldwide;
80% of banks were estimated to initiate DLT projects by the end of 2017;
>2,500 DLT-related patents have been filed.
The disruptive impact for financial services cannot be understated, with far-reaching impact on processes such as Know Your Customer (KYC), client identification and authentication, and for loyalty and rewards programs. In fact, it is anticipated that the changes set in motion by blockchain will go well beyond finance. This technology can also be applied to other multi-step transactions that require traceability and visibility, such as managing and signing contracts, education, and in private / public healthcare.
Opening the Door for Financial Inclusion
“Many banks and financial entities envision the blockchain as delivering value to their customers in the form of reduced fees, faster funds transfers and simplified processes. Much less heralded, but potentially far more dramatic, is the transformational impact the blockchain could have on the world’s massive unbanked population.” American Banker
One of the biggest and most immediate revolutions being introduced by virtual currencies is the financial inclusion. It is enabling for the world’s unbanked and underbanked.
Globally there are approximately 3.5 billion people worldwide who either have no access or insufficient access to financial services. They typically do not pass the vetting process, nor have the ability to pay the costs associated with such services whether for fees, travel, or other.
Blockchain, however, is changing all that. It enables the transfer of funds in a way that is much more affordable, avoiding the need to pay the typical fees involved with account opening and usability. And, as the transactions occur over the Internet – all that’s needed is a mobile phone. For, while the unbanked and underbanked often do not have bank accounts, most do indeed have a mobile phone at their disposal.
Without the need for the elite bankers and their middle man, the cost to transact with blockchain is considerably decreased. For example, with average international remittances, the rates are reduced from 6% per remittance transaction down to 0.5-3%. This can be extremely empowering for the unbanked who often send small amounts.
Why is Financial Inclusion so Important?
According to The Consultative Group to Assist the Poor (CGAP), some 2 billion adults around the world are not even in any banking system. While in developed countries, around 89% of adults are enlisted with a financial institution. That number drops to 41% in emerging economies. And just 5% in Sub-Saharan Africa and South Asia.
The disparity between rich and poor is palpable and grotesque in these figures. Political despots and unelected kings languish in palaces on golden thrones while skeletal infants lie dying in the sun-scorched plains. In Nigeria, a country where the national average life expectancy is just 53.05 years old, the panorama for most is pretty miserable. In similar countries, vast parts of the populace have no means of accessing credit and no money to open a bank account, should they wish to. This means there is likely no helpful financial system and little or no means to grow wealth for the average person.
You may question the need for having access to a banking system when access to food is surely more pressing. But being able to monetize their crops or borrow small amounts can bring a steady source of food and income, and save lives that need immediate medical attention. Cryptocurrencies can allow for trade to take place in smaller amounts, making the size of trade that is economically viable much smaller.
Financial inclusion (getting banked) is considered one of the most important factors in reducing poverty. And interestingly, of the 2 billion financially excluded adults around the world, some 50% of them have mobile phones and a further 480 million have access to the Internet. The implications of this are massive.
The Importance of Fintech
The McKinsey 2016 Global Payments Report estimates that by 2020, an additional US$400 billion worth of payments will be generated on top of the 2016 figures. Fintech is alive and well, and with good reason: it’s the differentiating factor in transforming the financial landscape, especially with regards to the financially marginalized.
Arguably, the greatest fintech innovation to date that many of us will witness in our lifetimes is blockchain technology. What originated with bitcoin is currently being innovated by pioneering companies across the world who are racing to find innovative blockchain solutions to solve ailing businesses and societal problems.
Cryptocurrency and its associated blockchain technology, at their very essence, are designed (by Nakamoto) to be financially inclusive thanks to its decentralized nature. There is no central organization controlling individual access to cryptocurrency and blockchain technology.
Naturally, governments are not always in agreement with this sentiment, leading to forced technological exclusion in many countries. But in the world of the underbanked blockchain could turn out to be a lifesaver.
The attraction of lower cost, friction-free, and seamless payment experiences, is taking blockchain and virtual currencies into a multitude of services beyond banking, such as ride sharing.
Take for example Grab. Initially launched in Kuala Lumpur, Malaysia, the company now dominates Southeast Asia’s ridesharing market with 2.3 million drivers in 168 cities across eight countries. Leaving Uber far behind, Grab is experiencing phenomenal success, having raised $2.5 billion from investors in 2017 and bringing its valuation to $6 billion.
Although Uber has invested great efforts and funds in its attempt to take the helm in the region, it has yet to overcome Grab. Some attribute the latter’s success to its keen ability to enfranchise the underbanked with a virtual payment option for its services.
That is, Grab enables riders to pay with the company’s mobile wallet payment solution – GrabPay. The service can be used for more than just rides, though. It is used for cashless payments for goods and services from participating shops and restaurants. GrabPay is very similar to the Chinese payments service Alipay, where consumers scan a merchant’s QR code, enter the amount, and simply tap “pay” to complete the transaction. Friction-free and seamless. The service was launched initially in Singapore and is planned for extended roll-out in the region this year.
A similar example comes from Indonesia’s first billion-dollar tech startup, ride-sharing leader Go-Jek, which introduced GoPay in 2016. At the end of last year the company had announced that it has agreed to acquire three local fintech firms in its effort to expand its digital payments services.
The opportunities presented by blockchain for the unbanked and underbanked are massive. They are also immense and present strong growth potential for financial services providers. Accordingly, those providers who ensure that they offer a virtual currency option, especially in the emerging markets that are home to the majority of the unbanked, can realize the promise of the future of more efficient, frictionless banking today.
One such company in the heart of the melee is WinstantPay, managed by former bankers and software executives who have been selling cutting edge technology to the banking system for many years, who have now developed a simple phone application that covers all the bases and allows anyone to send any large or small amounts of cash, cryptocurrency and/or gold with a basic mobile phone, anywhere instantly at a fraction of the cost we are all used to. To get your free wallet contact WinstantPay here and become a part of a great business.
WinstantPay is a global payment network providing merchants and individuals a reasonably priced global final payment in an instant, in any currency, anywhere, anytime, with integrated anti-money laundering (AML) compliance that reduces time, costs, risks associated with payments. Serving financial institutions of all sizes for the last 18 years with financial services, software development, and business support, WinstantPay is also a founding member of WorldKYC-AML. For more information on how WinstantPay can deliver cutting edge business, visit our website and follow us on Linkedin, Medium, Twitter, Facebook, Medium, and Github.